Contracts to buy homes up in June for second month

Thursday

Jul 28, 2011 at 12:49 PM

The number of people who signed contracts to buy homes rose for a second month in June, but the gain was not enough to signal a rebound in the weak housing market.

The National Association of Realtors reported Wednesday that its index of sales agreements for previously occupied homes rose 2.4 percent in June to a reading of 90.9. A reading of 100 is considered healthy by economists. The last time the index reached that level was in April 2010, the final month when buyers could qualify for a federal tax credit.

Pending sales in Sarasota County were down from May and a year ago while rising substantially in Manatee County.

In the territory covered by the Sarasota Association of Realtors, homes under contract totaled 754 during June, down 10.3 percent from the previous month and about 1.7 percent from a year ago. The measure had topped 1,000 during March, February and January. March was the peak at 1,208, the highest level in six years.

The 456 pending sales during June in the area covered by the Manatee Association of Realtors was up about 3 percent from the previous month and about 38 percent from a year ago.

Contract signings are typically a reliable indicator of where the housing market is headed because there is usually a one- to two-month lag between a sales contract and a completed deal.

But the Realtors group says a growing number of buyers have cancelled contracts ahead of closings after appraisals showed the homes were worth less than they bid. A sale is not final until a mortgage is closed.

Homes are now the most affordable they have been in years. But bargain prices and super-low mortgage rates have done little to boost sales.

Mixed reports on the struggling housing market -- an increase in contract signings, a rise in home prices, slumping sales of re-sold homes and huge numbers of foreclosures in waiting -- have left many economists puzzled. But one thing is clear: The housing market will not see a significant recovery this year.

"In absolute terms, this is a very depressed level, and with prices in most areas either still declining or flat, there is little incentive for buyers to be aggressive," said Joshua Shapiro, chief U.S. economist at MFR Inc.

The gain in contract signings nationally during June followed an 8.2 percent increase in May. However, those two increases did not make up for a huge drop-off in April, when contract signings fell 11.3 percent.

Sales of previously owned homes fell for a third straight month in June and are lagging behind last year's sales pace, when 4.91 million homes were sold, the fewest since 1997. In a healthy economy, people buy roughly 6 million existing homes annually.

The Standard & Poor's/Case-Shiller home-price index released Tuesday showed that non-seasonally adjusted prices rose in May in 16 of the 20 cities tracked. But that was mostly because of an influx of spring buyers.

Seasonally adjusted prices have fallen a modest 1.2 percent over the past six months, according to the index. That is roughly a third of the decline from the previous six months.

One reason prices are stabilizing is that millions of foreclosures are in limbo, awaiting the results of a government investigation into improper practices by mortgage lenders. Once that probe is complete, banks will resume seizing homes and prices will likely fall again.

Analysts say the weakening job market and the uncertainty over foreclosures could lead to deeper price declines in the second half of the year. They estimate prices will fall another 5 to 10 percent by year's end.

Renting has become a preferred option for Americans who lost their jobs during the recession. Since 1992, apartments had made up about 20 percent of home construction. But that figure now is running closer to 30 percent.

Information from the Associated Press was used in this report.

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